Reevely: Ontario doubles land-transfer tax rebate for first-time homebuyers, but it only helps a bit

Ontario’s government is white-knuckling it towards a balanced budget in time for the next election, revealed Finance Minister Charles Sousa’s update on the provincial treasury Monday.

A huge risk for everyone is that ludicrously high real-estate prices will fall, which made Sousa’s promise to make housing more affordable a bit tricky to pull off. Ultimately, the Liberals came up with a plan to reduce real-estate taxes for first-time buyers a little bit, which looks like action but won’t affect the housing market enough to freak anybody out.

Specifically, they’ll increase the maximum rebate on the province’s land-transfer tax from $2,000 to $4,000 for people buying their first properties, but increase the tax on real estate costing $2-million-plus to compensate.

Overstating how important high real-estate prices are to the Liberals just now would be hard.

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Not borrowing money to pay for government programs is desirable but it’s only become so important in Ontario right now because Sousa and the Liberals have sworn up and down that they’ll get that budget balanced by 2017. They set their own target and invited everyone to judge them by whether they hit it.

“People across our province got up this morning and went to school or work or volunteer,” Sousa said. “They’re making a difference. They’re doing their part to make our province stronger. People from all over our great province are building Ontario up, but not alone. They expect government to do its part, too.”

So the Liberals have spent on kindergarten, on daycare, on hospitals, on highways and transit systems and clean water. They’ve handed cheques to successful businesses to keep them here and they’ll hand out more. They’ve cut college and university tuition.

Since Premier Kathleen Wynne took office, provincial program spending has climbed from $126 billion to nearly $137 billion. That latter figure is after $800 million in savings and efficiencies that the Liberals say they’ll find by the time this fiscal year ends in March, but that they don’t know enough to specify yet.

On the upside, personal and corporate incomes have risen, helping make up the difference. Last year was a particularly good one, for which Sousa and Wynne will no doubt have popped the corks off some Ontario-made fizzy wine. That’s unequivocal good news: people and companies make more money, the government gets a bit of it, everybody goes home feeling a bit better about things than they did last year. The government understandably takes that as a sign that its policies are working and hopes like hell the trend continues.

But also, property prices have soared, especially in and around Toronto. Houses in some exurbs have nearly doubled in price in a year, which has meant a windfall for the Ontario government and terror for young renters who can’t get their heads around the idea of renting for life, as people do in a lot of very large cities.

The land-transfer tax is charged on a sliding scale; it starts at 0.5 per cent but rises to 2 per cent on properties that go for $400,000 or more. The tax brought in $1.6 billion in 2013-14; the government projects that’ll be up to $2.4 billion this year. This year’s take is $300 million more than the finance ministry forecast even just a few months ago.

Actually attacking real estate prices would be devastating to people who’ve borrowed every penny they can to buy in. A sharp decline in prices is one of the major risks to the province’s finances that the legislature’s budget watchdog pointed out in a report at the beginning of November. Obviously the government’s not going to do that to itself.

Instead, it’s knocking $2,000 off the taxes on properties that by definition cost more than $400,000, and often a lot more than that. Like cutting sales taxes on electricity, it’s just enough that the government can say it’s doing something, although not enough to really make much difference.

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